Ryanair Sues France to Overturn Labor Taxes

Ryanair Holdings PLC announced a lawsuit Wednesday against the French government, arguing that newly imposed labor taxes are illegally hampering the discount airline's operations.

Ryanair said it also has petitioned European Union competition authorities in Brussels, Belgium, in hopes of overturning the application of tax and other French labor standards on Ryanair employees based in France.

Jim Callaghan, Ryanair's director of regulatory affairs, said France "tries to force foreign airlines to apply French labor laws when they base aircraft in France."

"This is contrary to European laws on free movement of labor and services and the freedom of establishment, and is also contrary to the liberalized air transport market," Callaghan said. "This decree is clearly designed to discourage foreign airlines from establishing a base of operations in France in order to compete with the high-fare monopoly, Air France."

Dublin-based Ryanair, which is the fastest-growing airline in Europe, said it had filed its suit in the Council of State, France's highest administrative court.

Last month rival budget airline easyJet PLC filed its own challenge to the tax in the same court. EasyJet spokesman Toby Nicol said the airline took its action shortly before French prosecutors opened a probe into the alleged employment of 130 easyJet staff under British labor contracts at Orly Airport south of Paris.

Ryanair runs services to and from 18 French airports, and last year opened its first French hub in Marseilles that operates routes to 14 European destinations. Ryanair previously has claimed France was seeking to hamper Ryanair's expansion on French soil, an accusation rejected by French authorities.

A French government spokesman did not immediately return calls Wednesday seeking comment on the Ryanair move.

Ryanair's lawsuit takes issue with a Nov. 23 government decree requiring foreign airlines to pay French labor taxes on employees working inside the country.

A spokeswoman for Air France-KLM, Veronique Brachet, refused to comment on Ryanair's claims or on its lawsuit.

But she said CityJet, an Irish-based carrier owned by Air France-KLM, soon would begin paying full labor taxes on its French staff to comply with the law.

Ryanair shares fell 2.1 percent to close at 10.43 euros ($13.82) in broadly negative trading on the Irish Stock Exchange.

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AP Business Writer Laurence Frost in Paris contributed to this report.

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